Federal taxes when you sell your California home of 40 years for more than paid for it.?

Answer 1

You need to compute the basis of your home. This is the purchase price of your home, plus the costs of improvements, such as a new kitchen, bath, roof, assessments for sewer or roads. Add all this together.

Then subtract the sales commission from the selling price of your home.

Take the difference. Then subtract $500,000 if married or $250,000 if not married. This amount is your taxable gain. It will be entered on Schedule D and be taxed at a maximum rate of 15%.

For more details, see the link to the IRS Publication Selling Your Home

Answer 2

If you lived in your home as your principal residence for 2 of the 5 years immediately prior to the sale, you can exclude all or part of the gain from Federal taxes. The exclusion amounts are $250,000 if filing Single or $500,000 if Married Filing Jointly.

Any excess over the exclusion amount will be taxed as a long-term capital gain at the lower rate, normally 15%.